Drugmaker GSK to invest $200 million in African factories, R&D

The GlaxoSmithKline building is pictured in Hounslow, west London June 18, 2013. REUTERS/Luke MacGregor

By Ben Hirschler

(Reuters) - Drugmaker GlaxoSmithKline plans to invest up to 130 million pounds ($216 million) in Africa over the next five years as chronic diseases become more common among the continent's swelling urban middle classes.

The decision reflects the draw for the pharmaceutical industry of the region's rapid economic growth and rising demand for treatments for non-communicable diseases (NCDs) like heart and lung disorders, diabetes and cancer.

France's Sanofi has also highlighted Africa as a promising market.

Sub-Saharan Africa currently accounts for only around 500 million pounds of GSK's annual sales, which totaled 26.5 billion pounds in 2013, but the group sees potential for much more as African economies grow.

"If you're looking for a one- to two-year payback, then Africa is probably not the place to be," GSK Chief Executive Andrew Witty said in a telephone interview.

"But if you want to build relationships for the long term, then I think Africa is becoming very interesting because it is going through an inflection point in terms of growth."

NCDs are expected to account for 46 percent of all deaths in sub-Saharan Africa by 2030, up from 28 percent in 2008, according to the World Bank, which will change the nature of the African market and increase demand for new products beyond treatments for acute infections.

Witty, who set out his firm's plans at a conference in Brussels on Monday, said up to 100 million pounds of the new money would be used to expand manufacturing in Nigeria and Kenya, and to build as many as five new factories.

GSK, which currently makes drugs in Kenya, Nigeria and South Africa, is reviewing possible factory locations in countries including Rwanda, Ghana and Ethiopia. The first new plants could be up and running in around three years, Witty said.

CREATING 500 JOBS

In addition, Britain's biggest drugmaker will invest 25 million pounds to create the world's first open-access research and development (R&D) laboratory for NCDs in Africa.

The overall investments will create at least 500 jobs - a substantial increase on the 1,500 currently employed by GSK in sub-Saharan Africa.

The R&D center will allow GSK scientists to work with outside researchers to investigate the specific needs of African patients with chronic diseases by focusing on variations in the nature of certain illnesses on the continent.

An above-average number of Africans with high blood pressure, for example, appear to be resistant to medical treatment, and there is also a high prevalence of aggressive breast cancer in younger women. The aim is to find new drugs to address the specific needs of such African patients.

Additional funding will also be funneled into establishing 25 academic chairs at African universities and increasing support for community health worker training.

GSK has been stepping up its exposure to many of the world's emerging markets in recent years by increasing investment in local supply lines and sales forces, striking deals, and buying out minority shareholders in certain subsidiary businesses.

Last week it took full control of its consumer healthcare unit in Indonesia after recently increasing its stake in local units in India.

Witty has made emerging markets a key growth platform for GSK. He has stuck with the strategy despite recent problems in China, where the company's sales have been hit by bribery allegations.

($1 = 0.6011 British Pounds) Drugmaker GlaxoSmithKline plans to invest up to 130 million pounds ($216 million) in Africa over the next five years as chronic diseases become more common among its swelling urban middle classes.

French pharmaceutical company Sanofi has also highlighted Africa as a promising market, reflecting the draw of the region's rapid economic growth and rising demand for treatments for non-communicable diseases (NCDs) such as heart and lung disorders, diabetes and cancer.

Sub-Saharan Africa currently accounts for only around 500 million pounds of GSK's annual sales, which totaled 26.5 billion pounds in 2013, but the group sees potential for much more as African economies grow.

"If you're looking for a one- to two-year payback, then Africa is probably not the place to be," GSK Chief Executive Andrew Witty said in a telephone interview.

"But if you want to build relationships for the long term, then I think Africa is becoming very interesting because it is going through an inflection point in terms of growth."

NCDs are expected to account for 46 percent of all deaths in sub-Saharan Africa by 2030, up from 28 percent in 2008, according to the World Bank, which is changing the market for drugs in Africa and increasing demand for new products beyond treatments for acute infections.

Witty, who set out his firm's plans at a conference in Brussels on Monday, said up to 100 million pounds of the new money would be used to expand manufacturing in Nigeria and Kenya, and to build as many as five new factories.

GSK, which currently makes drugs in Kenya, Nigeria and South Africa, is reviewing possible factory locations in countries including Rwanda, Ghana and Ethiopia. The first new plants could be up and running in around three years, Witty said.

CREATING 500 JOBS

In addition, Britain's biggest drugmaker will invest 25 million pounds to create the world's first open-access research and development (R&D) laboratory for NCDs in Africa.

The overall investments will create at least 500 jobs - a substantial increase on the 1,500 currently employed by GSK in sub-Saharan Africa.

The R&D center will allow GSK scientists to work with outside researchers to investigate the specific needs of African patients with chronic diseases by focusing on variations in the nature of certain illnesses on the continent.

An above-average number of Africans with high blood pressure, for example, appear to be resistant to medical treatment, and there is also a high prevalence of aggressive breast cancer in younger women. The aim is to find new drugs to address the specific needs of such African patients.

Additional funding will also be funneled into establishing 25 academic chairs at African universities and increasing support for community health worker training.

GSK has been stepping up its exposure to many of the world's emerging markets in recent years by increasing investment in local supply lines and sales forces, striking deals, and buying out minority shareholders in certain subsidiary businesses.

Last week it took full control of its consumer healthcare unit in Indonesia after recently increasing its stake in local units in India.

Witty has made emerging markets a key growth platform for GSK. He has stuck with the strategy despite recent problems in China, where the company's sales have been hit by bribery allegations.